How Sweden approaches innovation
Sweden’s approach to innovation is perhaps best exemplified by the Swedish Innovation Authority, Vinnovaa government agency established in 2001 based on a series of predecessors dating back to at least 1968.
The innovation agency works much like its counterparts in other countries, in the same way as The Swedish Agency for Technology and Innovation (Tekes) in neighboring Finland, and to the part of the US National Science Foundation (NSF) that does seed funding on the other side of the Atlantic.
The Swedish government gives Vinnova more than 300 million euros every year to invest through grants to different types of actors, which can be small companies, research institutes, large competence centers or consortia of companies working together in projects.
Vinnova invests this money along 10 different themes, including sustainable industry and digital transformation. To report on the social and economic effects of its funding, the authority produces two effect studies annually. It has also published a document which describes its approach to tracking the impact of investments.
Success stories in innovation
“It is never that we are alone in the responsibility of success or failure,” says Goran Marklund, head of strategic intelligence operations and deputy director general at Vinnova. – We usually finance collaborative projects where we require the actors to contribute 50%, or more for large companies. This ensures that they have a stake in the project – and that they will do what they need to do to be successful. There are often other external investors.”
Vinnova runs several projects in collaboration with The Energy Agency. This includes supporting a battery revolution is currently underway in northern Sweden – a project that revolves around Northvolt, a company whose founder, Peter Carlsson, was previously an executive at Tesla. Now Carlsson is driving Northvolt in directions that are revolutionizing battery technology for many industries. For example, its batteries play an important role in converting vehicles to electric ones – and the automotive industry is a key industry in Sweden.
Vinnova is also involved in artificial intelligence (AI), after writing a report on the subject and have helped to start AI Sweden, an umbrella initiative promoting the adoption of AI in the country. Vinnova is looking for opportunities to promote the use of AI within companies and public service companies and to increase AI competence in Sweden.
Another area where Vinnova has invested is quantum computing. Among other things, the agency ran one kickstart program 2021 to support projects leading to the commercialization of quantum technology. “The global race is between China and the US, and with the EU [European Union] as a whole, especially France and Germany, says Marklund. “Although there is good applied research in quantum computing in Sweden, it is a challenge for such a small country to keep up with the rest of the world.”
One area where Sweden has excelled for decades is in telecommunications – a key industry for Sweden, where Ericsson distinguishes itself as one of the world’s leaders. In an impact study published in 2008 called The effects of research on Swedish mobile phone development: the history of GSMVinnova analyzed the connection between research financed by Vinnova’s predecessors (Stu and Nutek) and the transformation of the Swedish telecoms industry.
The Ericsson group was the big winner from the transformation and the company took an early lead in the global GSM market. According to some estimates, Ericsson had a five-year advantage over its competitors. While it is difficult to measure how important a single contributor was to this success, strategic funding was certainly critical, especially for innovation in digital radio technology.
Sweden is participating in the digital transformation of mining
Another major industry in Sweden is mining – and a great deal of work is underway to make mining fully sustainable. With the help of Ericsson, ABB and Volvo, Swedish mining operator The car set one test mine in Kankberg (in the picture above) which will be fully automated as part of a pilot project overseen by Vinnova. The test mine started working two and a half years ago and will eventually operate independently, without personnel in the mine itself.
The project started in Sweden when Ericsson turned to Vinnova with the aim of implementing digitization projects. Vinnova proposed two pilots. The first was the automation of manufacturing in Gothenburg; the other was the Kankbergsgruvan in Västerbotten County, which was part of a European effort to make mining more sustainable.
Ericsson installed a 5G network throughout the Kankberg mine in early 2016, covering a road down to the mine. Even with dead ends and caves with no line of sight to the antenna, Ericsson managed to provide high bandwidth (100mbps) and low latency throughout the mine. The network also met high reliability requirements – very important requirements, as a loss of signal, even for a few seconds, can cause major problems.
This ongoing demonstration project fits into the EU Commission’s program Next Generation Carbon Neutral Pilots for Smart Innovation Mining Systems (or NexGen SIMS). One of the interesting aspects of the project is that it requires innovation in various industries – mining, telecommunications and machinery – which is beneficial for Sweden overall.
Societal challenges drive investment
– Sweden has no clearly defined national strategies for digital technology that we can follow, says Marklund. “But everyone knows what the hot topics are. Instead of trying to find a brand new topic that most people in the world haven’t thought of yet, what matters is the execution—how you make it happen on the ground.”
“Having said that, Vinnova is definitely in line with where many of the investments are going, internationally and nationally. We are everywhere. We are in IT and digital technology, as in health, biotechnology and all kinds of technologies.”
Vinnova is also the Swedish hub for the EU’s framework programme Horizon Europe. In this capacity, it facilitates Swedish actors’ participation in the EU’s framework program, the largest research and development program in the world, with clearly specified investment areas. Digital mining is an example of how Vinnova helps finance Swedish projects that fit into the EU’s strategies.
Göran Marklund, Vinnova
“Our approach at Vinnova is more than just technical,” Marklund told Computer Weekly. “We start by discovering societal challenges. This is what will drive competitiveness in the future. If you’re good at driving solutions to societal challenges, you’re probably going to be very competitive, because those markets are going to grow.”
Once a societal challenge has been identified, the next step is to think about what it will take to overcome the challenge. The solution may have a technical component, but it must be designed to work in specific contexts, such as sustainable cities, which is one of the 10 themes in which Vinnova invests. Sustainable industry is another – industry needs to be transformed into more sustainable solutions, to protect the environment of course, but also because the market demands sustainability.
“If you don’t transform your entire business, you will probably be out of the market somewhere afterwards,” explains Marklund. “We try to put the technology in a wider systemic context. For example, we see technology as something that enables a transformation that provides competitive sustainability.”
As much as possible, the philosophy is to invest in technology that meets the needs of society. Vinnova is looking at how AI can be used in the context of social change, and how 5G signaling can be spread deep below the earth’s surface to help automate mining, which will result in sustainable mining.
When it comes to battery technology, putting the technology into a wider context means answering a series of questions. How do you get the batteries to work at the efficiency you need? Then you have questions about how much energy is required, and whether that energy is green. If it is not green, the solution cannot be sustainable, so the market value of the innovation in question would be very low.
The query also leads to the materials needed for the batteries and where they can be obtained. It turns out that the materials currently used for batteries are scarce and China dominates the market. This leads to questions about what alternative Sweden has to get hold of that material. The minerals are found in Sweden (and elsewhere in Europe) but have been abundant and cheap in China for so long that these businesses never developed in Sweden.
– Sweden must develop these resources now because it cannot depend on China for such critical things, says Marklund. “Then it becomes a very critical focus and identifies a set of technologies that are needed.”
“This is how we go about finding places to invest. Technology alone does not lead. We also take into account the market around the innovation.”
Swedish national advantages
The areas of investment also tend to cluster around a country’s national advantages – what a country is already good at or where industry is already developed.
One of Sweden’s national advantages is the existing automotive industry, which is denser in Sweden than in Germany – that is, the amount of revenue generated per person is higher. This includes cars and trucks.
While the Chinese holding company Geely now owns both Volvo and Polestar, most of the work is still done in Sweden with Swedish workers. Automotive also has a major impact on many other sectors that generate solutions for the automotive industry.
Another national advantage is the telecom industry, where Ericsson excels internationally and is very much connected to digital transformation. Mining and steel are also important industries and dominate across Europe in some parts of these industries.
Another major industry is forestry. All these industries have given rise to a strong machinery industry.
Sweden also has a very advanced research community, with pure and applied research in a number of areas, including artificial intelligence, quantum computing and the internet of things (IoT).
Sweden’s education system is also very good, with a new focus on lifelong learning. Digitization means that things change faster, therefore skills must be developed in the workforce faster than before. In addition, more and more jobs require digital skills.
Challenging times for Swedish startups
As for the future, Marklund expects some challenges ahead, especially for startups. Over the years, Sweden has produced a very vibrant startup community, especially in Stockholm, and produced several success stories, e.g. Spotify and Skype.
The startup community still has great potential, but with the economic crisis, new challenges have arisen, especially when it comes to attracting capital investment. With prices and interest rates rising significantly, the business models of many of the startups are not looking as good as they used to.
“Many startups are not profitable in the direct sense,” says Marklund. “Venture capital is deployed based on market share and expectations rather than profitability.
“This has already been seen here with Klarna bank, which was a big hit. Klarna bank is one of the startups that took off very quickly. It is a bank owned by a credit market and has risen very quickly in terms compared to large Swedish banks. But now, with turmoil in the financial sector, venture capitalists are getting scared. We are in very uncertain times right now. This applies not only in Sweden, but in many places in the world.”
Vinnova tries to fill the gaps by investing in innovations that provide long-term solutions to societal problems. By using technology to overcome the challenges within the country, Sweden sometimes gets so good at it that it becomes a net exporter of certain solutions. While Sweden is too small to become an overall leader in digital transformation, its approach to innovation allows the country to keep up – and even lead in some niches.